Global Yield Curves Are Snapping Steeper

Perhaps it is recency bias playing its tricks, but Treasury and Bund yields curves are steepening dramatically for the second day in a row, this time dragged higher by comments on longer-term issuance plans from Germany.

As always, German and US yield curves are moving in sync with a notable steepening again - the biggest 2-day steepening since Trump was elected.

The driver appears to be a report publushed earlier by Bloomberg that the head of Germany’s Federal Finance Agency says the government will seek to take advantage of persistently low interest rates and sell a greater volume of 30-year Bunds next year. The share of six-month and 30-year security issuance will rise in 2018 compared with the current year, while the share of 10-year Bund sales will decline.

As Citi notes, Treasuries are following its European peers and given how the flattening trend has dominated fixed income markets, one-sided positioning now looks vulnerable.

Furthermore, as we noted previously, there is potential for some violent moves in Bunds (and thus Treasuries). And the global biond market is suffering today...